The municipal bond market will get a healthy dose of issuance for the first full week back in September, as New York City leads municipalities looking to tap growing investor demand for their debt.
Primary Market
Estimated volume for the week of Sept. 16 is way up to $11.42 billion from a revised total of $2.59 billion in the past week, according to revised data from Thomson Reuters. The upcoming slate is composed of $9.37 billion of negotiated bond deals and $2.05 billion of competitive bond sales.
"We see excellent potential for investors to deploy cash next week as the recent rise in bond yields globally offer a window of opportunity to lock in higher yields," said Michael Pietronico, CEO at Miller Tabak Asset Management.
New York will dominate the calendar, as two issuers from the Big Apple will each be coming with deals greater than $1 billion.
The NY Metropolitan Transportation Authority is expected to come with $1.06 billion of Hudson Rail Yards Trust obligation bonds on Wednesday. The deal will be managed by Goldman, Sachs and is rated A2 by Moody's Investors Service.
The New York City Transitional Finance Authority is scheduled to hit the market with a total of $1.05 billion, including one negotiated deal and two competitive sales.
Ramirez is scheduled to price the NYC TFA's $800 million of future secured subordinate bonds on Wednesday, following a two-day retail order period.
The TFA will also bring two competitive sales of taxable of future secured subordinate bonds to market, one for $62.495 million and the other for $187.505 million.
"There is a little something for everybody and I don't anticipate any of the deals will have problems finding buyers," said a New York trader. "There is so much demand out there, pretty much anything and everything is selling."
Siebert is slated to price the State of Connecticut's $964.32 million of special tax obligation bonds and special tax obligation refunding bonds for transportation infrastructure purposes on Tuesday, following a one day retail order period. The deal is rated Aa3 by Moody's, AA by S&P Global Ratings and AA-minus by Fitch Ratings.
The largest competitive sale will come from the Virginia Public Building Authority, which will be selling three separate sales totaling $550 million, the largest totaling $386 million.
"We expect the new issue market to continue to be well received as cash continues to move into this market at a steady pace," said Pietronico. "We also expect the next few weeks to be ripe for volatility as the election and a potential tightening by the Federal Reserve begin to move markets."
Secondary Market
Top-rated municipal bonds finished weaker along with Treasuries Friday on continuing worries about the European Central bank's decision not to expand its economic stimulus program.
The yield on the 10-year benchmark muni general obligation rose four basis points to 1.49% from 1.45% on Thursday, while the yield on the 30-year rose five basis points to 2.20% from 2.15%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were weaker on Friday. The yield on the two-year Treasury rose to 0.79% from 0.77% on Thursday, the 10-year Treasury yield gained to 1.67% from 1.61% and the yield on the 30-year Treasury bond increased to 2.39% from 2.32%.
The 10-year muni to Treasury ratio was calculated at 89.2% on Friday compared to 90.0% on Thursday, while the 30-year muni to Treasury ratio stood at 92.0% versus 92.8%, according to MMD.
Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended Sept. 9 were from California, Ohio and Illinois issuers, according
In the GO bond sector, the California 3s of 2046 were traded 65 times. In the revenue bond sector, the Hamilton County, Ohio 5s of 2046 were traded 33 times. And in the taxable bond sector, the Illinois 6.63s of 2035 were traded 21 times.
Week's Most Actively Quoted Issues
Puerto Rico and California issues were among the most actively quoted bonds in the week ended Sept. 9, according to Markit.
On the bid side, the Puerto Rico Commonwealth GO 5.5s of 2039 were quoted by 13 unique dealers. On the ask side, the California HFFA revenue 3s of 2047 were quoted by 29 unique dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 15 unique dealers.
Lipper Reports More Inflows
For the 49th straight week, municipal bond funds reported inflows, according to Lipper data released on Thursday. The weekly reporters saw $985.786 million of inflows in the week ended Sept. 7, after inflows of $428.291 million in the previous week, Lipper said.
The four-week moving average remained positive at $818.423 million after being in the green at $789.730 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds experienced inflows, gaining $617.231 million in the latest week after inflows of $159.510 million in the previous week. Intermediate-term funds had inflows of $182.862 million after inflows of $55.211 million in the prior week.
National funds had inflows of $912.909 million on top of inflows of $342.335 million in the previous week. High-yield muni funds reported inflows of $264.215 million in the latest reporting week, after inflows of $30.474 million the previous week.
Exchange traded funds saw outflows of $71.151 million, after inflows of $95.576 million in the previous week.
